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National Restaurant Association - Starbucks' Schultz brews excitement at NRA Show

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Starbucks' Schultz brews excitement at NRA Show

With a nod to the past and an eye on the future, Howard Schultz, chairman and CEO of Starbucks Coffee Co., told attendees at this year's NRA Show that the key to success is to create exciting experiences for the customer and give back to the community, particularly during the country's challenging times.

"As we assemble here today, there are things going on in the U.S. and around the world that dramatically affect lives," he said. "The government has a debt on its balance sheet of more than $17 trillion, and 12 million people are still unemployed -- a disproportionate amount of them Hispanic and African American. Because of federal cuts on state budgets, we're witnessing an unbelievable level of cuts on social services around the country, a lifeline to the people who need it most."

Schultz, who delivered the show's keynote address, said his family background helps him understand economic struggle. Born in Queens, N.Y., he grew up in the projects after his father, a truck driver, suffered a debilitating hip and leg injury and was dismissed from his job. It was that event, he said, that would eventually lead him to providing comprehensive health care coverage and other benefits for Starbucks employees.

"I wanted to create the kind of company my parents didn't get the chance to work for," he said.

He got that chance after joining Starbucks in 1981 as its director of marketing, and credits the industry's "greatness and the entrepreneurial dream that is still alive today" with being able to build the kind of company he wanted.

Soon he rose to the top rungs of its corporate ladder. "One of the first things we did was create comprehensive health care for our employees and offer them shares in the company," he said. "Success is best when it is shared."

For 20 years, he said, Starbucks continued to grow. "Starbucks was on a magic carpet ride," he said. "From 1992, everything we touched turned to gold. We thought it was never going to end."

In 2002, Schultz stepped down from his CEO post, but stayed on as chairman. In 2007, however, a seismic change in the company's fortunes brought Schultz back into the day-to-day fold as CEO.

Schultz's first step in turning things around was a gamble that would pay big dividends. He told his executive team he wanted to bring every Starbucks store manager to headquarters and explain to them the company's situation. At a cost of approximately $32 million and despite many objections, he brought them in and told them what was happening.

"I broke down and cried because we let our partners down," he said. "We were not deserving of them. I promised them we would turn things around. The most important thing is for the store manager to create excitement in the brand. It is the experience in each store that builds a brand. We had to create demand and excitement and experience because at the height of the economic crash, it was no longer visible. Starbucks was built by people to exceed the expectations of its customers."

Nearly 11,000 store managers showed up at that meeting and Schultz said it was a pivotal moment for him as a leader.

"I had to decide if I could trust these people with how bad things really were. I decided to be 100 percent transparent and laid out the facts to each one of them. But I also had two asks: what it truly means to be great and what it means to be accountable to that greatness. Greatness is not 90 percent or 99 percent, especially if you are fighting for your life and every customer experience matters."

He said he asked them not to settle for mediocrity, to rise to the challenge, and help rebuild the broken brand.

"I asked them not to be bystanders," he said. "I told them we are all wearing the green apron and are all personally responsible and accountable."

After fighting its way back, Starbucks is once again performing at the top of its game, Schultz said. In 2011 the company recorded record profits and stock prices and repeated the feat in 2012. He said it is on track to do the same in 2013.

"Innovation is not a line extension," he said. "It goes back to the entrepreneurial DNA of the company. Curiosity means seeing around corners and anticipating things that no one else sees," including involvement in technology and social media, he said. "Every company in the world must make an investment in social media."

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